Have you considered consulting with a tax accountant in Sydney about the potential personal liability that may arise for a director who serves only one day in a company regarding the company’s complete debt for a superannuation guarantee and PAYG withholding?
The amendments to the Director Penalty regime contained in the Taxation Administration Act (1953) introduced in June 2012 could provide for this situation.
Director Penalty Regime
The Director Penalty Regime ensures that directors ensure the company complies with specific taxation and superannuation obligations. The ATO may issue a Director Penalty Notice (DPN) equal to the company’s unpaid superannuation and PAYG withholding amounts. To discharge a penalty, a director must ensure the company, within 21 days to either:
- Pay the debt
- Make an arrangement to pay the debt*
- Place the company into voluntary administration
- Place the company into liquidation
If the company has not reported the unpaid amounts within 3 months, the only way to discharge the penalty is to pay the debt in full.
*A DPN is only issued where the debt has been outstanding for some time, and the longer the debt is outstanding, the less likely the ATO is to accept an arrangement to pay the debt off (a sizeable up-front payment with the balance paid off within 6 months and proof of the company’s ability to make repayments would probably be required).
It is more likely that this payment arrangement would be accepted before the DPN is issued. However, options 1 and 2 should be considered before options 3 and 4.
Former Directors
Directors should be aware that they cannot simply absolve themselves of potential personal exposure by resigning as a director.
Former directors may be liable for penalties due up to the date of their resignation.
Former directors may also be liable for penalties after their resignation, where the first withholding event in the reporting period occurred before their resignation.
New Directors
New Directors may be liable for penalties following their appointment and debts before their appointment. New directors have 30 days from their appointment before they become liable for unpaid superannuation and/or PAYG withholding.
Defences
Directors can avoid liability for penalties if:
- They were ill or were not involved in the management of the company
- They ensured one of the following happened
- The company paid the outstanding amount
- An administrator was appointed
- The company was wound up
If you have any concerns about your directorship or are considering becoming a director, it’s a good idea to talk to us.
Kreston Stanley Williamson Team
*Correct as of March 2016
*Disclaimer – Kreston Stanley Williamson has produced this article to serve its clients and associates. The information contained in the article is of general comment only and is not intended to be advice on any particular matter. Before acting on any areas in this article, you must seek advice about your circumstances. Liability is limited by a scheme approved under professional standards legislation.
